In a notable rebound from the previous quarter, the second quarter of 2025 saw institutional investments in India’s real estate sector reach USD 1.80 billion. Despite a 42% year-on-year decline, this resurgence was driven largely by foreign inflows from major global players such as the United States, Japan, and Hong Kong, which together accounted for nearly 89% of all overseas capital, according to a report by property consultancy Vestian.
Investment Trends and Influencing Factors
While the quarterly investment figures reflected a significant decrease from the record highs of the previous year, the 122% surge from the last quarter indicates a growing investor confidence. This trend surfaces amidst ongoing geopolitical tensions and macroeconomic challenges. Foreign investors retained a dominant position, contributing 66% of the total inflows in Q2 2025, albeit slightly down from 71% during the same period last year.
| Key Investment Insights | Details |
|---|---|
| Total Q2 2025 Investments | USD 1.80 billion |
| Foreign Investment Contribution | 66% |
| Investment from US, Japan, Hong Kong | USD 1.06 billion |
| Commercial Asset Investment Share | 69% |
| Residential Asset Investment Share | 11% |
Commercial Assets Dominate
The data highlights a clear preference for commercial assets, which absorbed 69% of the foreign investments. This includes a substantial focus on office spaces, retail, co-working, and hospitality projects. Residential assets accounted for a modest 11% of the total investments.
“The shift from direct investments to co-investments by foreign investors underscores their cautious approach amid uncertain demand caused by geopolitical conflicts and macroeconomic instability,” Vestian noted in its research.
Domestic Players and Investment Dynamics
Domestic investors contributed 19% to the total investment pool, a slight decrease from 21% a year ago. In terms of value, domestic investments were USD 336 million, a 47% drop annually and a 28% decline from the previous quarter. This caution among Indian investors is attributed to global economic volatility and concerns over trade tariffs.
Market Resilience and Future Projections
Shrinivas Rao, FRICS, CEO of Vestian, emphasized the resilience of India’s property market, particularly within the commercial real estate sector. “Institutional investments saw a strong recovery in Q2 2025, primarily fuelled by a sharp resurgence in commercial real estate activity compared to the previous quarter,” Rao explained. He further stated that the quarterly growth reflects renewed investor confidence, bolstered by solid macroeconomic fundamentals and strong inherent demand.
“This growth momentum is expected to continue as several rating agencies predict economic growth of more than 6% during FY 2026. Moreover, the recent reduction in the repo rate is expected to bolster positive sentiment by reducing borrowing costs and improving credit access for the sector,” Rao added.
FAQs
Q1: What was the total foreign investment in Indian real estate in Q2 2025?
A1: Foreign investments in Indian real estate were USD 1.19 billion in Q2 2025, representing a 46% decline from the previous year.
Q2: Which countries were the major contributors to foreign investments?
A2: The United States, Japan, and Hong Kong were the major contributors, collectively investing USD 1.06 billion.
Q3: What percentage of investments were directed towards commercial assets?
A3: Approximately 69% of the investments were channelled into commercial assets.
Q4: How did domestic investments fare during this period?
A4: Domestic investments accounted for 19% of total investments, valued at USD 336 million, marking a 47% year-on-year decline.
Q5: What is the outlook for the Indian real estate market in the near future?
A5: The outlook remains positive, with expectations of continued growth driven by strong macroeconomic fundamentals, predicted economic growth of over 6% in FY 2026, and improved borrowing conditions due to reduced repo rates.
In conclusion, while the year-on-year figures show a decline, the significant quarterly growth in institutional investments reflects a cautious yet optimistic outlook on India’s real estate sector, led by substantial foreign inflows. As the market navigates through global challenges, the emphasis on commercial ventures and strategic co-investments are anticipated to drive sustained growth.